TMI Blog2023 (2) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITA No. 465/PUN/2022 - - - Dated:- 3-2-2023 - SHRI R. S. SYAL, VICE PRESIDENT AND SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER For the Appellant : Shri Dhanesh Bafna, Riddi Maru Sailee Faterpekar For the Respondent : Shri J.P. Chandraker ORDER PER SHRI PARTHA SARATHI CHAUDHURY, JM This appeal preferred by the assessee emanates from order of the ld. D.R.P. dated 14-03-222 for A.Y. 2017-18 as per the following grounds of appeal. Ground No. 1 On the facts and in the circumstances of the case and in law, the Ld. Dispute Resolution Panel ('DRP') erred in disregarding the fact that while passing the draft assessment order, the National Faceless Assessment Centre ('NaFAC') erred in passing the draft assessment order dated 29 June 2021 without following the mandate as laid down by section 144C of the Income Tax Act, 1961 ('the Act') and issuing the notice of demand u/s 156 of the Act along with the draft assessment order. The Appellant prays that the draft assessment order is null and void being passed in violation of the law making the assessment proceedings non est and invalid. Ground No. 2: On the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as grounds on merit. We would first adjudicate the legal ground raised by the assessee which is as follows: On the facts and in the circumstances of the case and in law, the Ld. Dispute Resolution Panel ('DRP') erred in disregarding the fact that while passing the draft assessment order, the National Faceless Assessment Centre ('NaFAC') erred in passing the draft assessment order dated 29 June 2021 without following the mandate as laid down by section 144C of the Income Tax Act, 1961 ('the Act') and issuing the notice of demand u/s 156 of the Act along with the draft assessment order. The Appellant prays that the draft assessment order is null and void being passed in violation of the law making the assessment proceedings non-est and invalid. 6. The ld. A.R of the assessee submitted that section 144C of the Income-tax Act, 1961 (hereinafter referred to as the Act ) which is a non obstante provision specifies that the A.O shall forward a draft assessment order to the concerned assessee if the A.O proposes to make any variation which is prejudicial to the interest of the assessee. However, in the instant case, the A.O instead of draft asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 14-03-2022. Thereafter, the final assessment order was passed by the A.O on 29-04-2022. 9. We have heard the rival contentions, perused the orders of the subordinate authorities and considered the judicial pronouncements placed on record. The contention of the assessee is that since the A.O had issued a demand notice u/s 156 and notice for initiating penalty proceedings u/s 274 r.w.s. 270A of the Act along with the draft assessment order dated 29-06-2021, the draft assessment becomes a final assessment order. The A.O failed to pass the draft assessment order which is in violation of provisions of sec. 144C of the Act. 10. Section 144C of the Act with the marginal note Reference to Dispute Resolution Panel provides through sub-section (1) of section 144C that: The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12. The Hon ble Apex Court in Kalyan Kumar Ray (1991) 191 ITR 634 (SC) has held that assessment order involves determination of income and tax. It laid down that: ` Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial for the assessee as the former.‟ Again the Hon ble Summit Court in Auto and Metal Engineers vs. UOI (1998) 229 ITR 399 (SC) has held that the process of assessment involves (i) filing of the return of income under s. 139 or under s. 142 in response to a notice issued under s. 142(1) ; (ii) inquiry by the AO in accordance with the provisions of ss. 142 and 143 ; (iii) making of the order of assessment by the AO under s. 143(3) or s. 144; and (iv) issuing of the notice of demand under s. 156 on the basis of the order of assessment. The process of assessment thus commences with the filing of the return or where the return is not filed, by the issuance by the AO of notice to file the return under s. 142(1) and it culminates with the issuance of the notice of demand under s. 156. On going through the above precedents, it is manifested that the assessment proceed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also the AO passed the draft order and simultaneously issued notice of demand and initiated penalty proceedings by issuing notice u/s 274 of the Act. It was thereafter that the final assessment order was passed. The assessee challenged the legality of the final assessment order. Vide its order dated 02-07-2019, the Tribunal in ITA No.714/PUN/2011 has held that the demand got crystallised on passing of the draft order pursuant to issue of demand notice which is contrary to the relevant provision of the Act. Ex Consequenti, the draft order was held to be invalid in law and the consequential assessment order void ab-initio. 16. We also observe that the facts and circumstances of the instant case are similar to those considered by Pune Bench of the Tribunal in the case of Skoda Auto India Pvt. Ltd. Vs. ACIT in ITA No. 2344/PUN/2022 for A.Y. 2008-09, order dated 03-06-2019 and DCIT Circle 8 Pune Vs. Atlas Copco (India) Ltd. in ITA No. 649/PUN/2013 and 1726/PUN/2014 for A.Y. 2008-09 and 2009-10, order dated 29- 08-2019. Since the A.O in the present case had issued notice of demand at the stage of draft order which actually ought to have been done at the stage of passing a final orde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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